GM moving closer to turnaround, CEO says

“The dividend cut ... is only a modest step,” credit ratings agency Fitch Ratings said in a statement. “The cuts in the dividend and in management compensation could, however, facilitate conversations with the UAW.”

Shares of GM closed down 53 cents, or 2.3 percent, at $22.81 in regular trading on the New York Stock Exchange.

The announcement came a day after Jerome York, a top aide to Kerkorian, was elected to GM’s board. It mirrored some of the measures York previously proposed — including cutting the yearly dividend to $1 a share and cutting pay for Wagoner and his senior leadership team — to help invigorate GM’s turnaround efforts.

York is a consultant to Tracinda Corp., Kerkorian’s private equity firm, which owns 9.9 percent of GM’s common stock and is GM’s third-largest shareholder.

Wagoner said the company has long been working on issues such as health care and pension costs. And he said GM didn’t have plans to release profitability goals, cut all white-collar salaries or drop brands like Saab or Hummer, which were among York’s proposals.

Asked Tuesday whether GM’s move might lead to future concessions by the union, however, UAW President Ron Gettelfinger said: “Absolutely not. We’ve done our share. We’re ready to move forward.”

Gettelfinger said the union had sought reductions in executive compensation across the board during its discussions about reducing health care costs.

“We said it had to be all in, so it just appears that that’s what they’ve done,” said Gettelfinger, who was attending a conference in Washington.

Most of the plant closures and job cuts announced by GM in November must be negotiated with the UAW in 2007, when the automaker and the union write a new contract. The UAW already agreed last year to require hourly workers and retirees at GM and Ford Motor Co. to pay more for their health care.

Wagoner said GM is working with the union to make the company more competitive, but said Tuesday’s announcement was not intended to send a message to the UAW.

As part of Tuesday’s changes, Wagoner will take a 50 percent pay cut. That would reduce his salary to about $1.1 million, based on GM figures for his 2004 compensation. Details on his 2005 compensation — including possible stock options — won’t be released until this spring, but GM said he won’t get a bonus.

Vice Chairmen John Devine, Bob Lutz and Fritz Henderson will see their salaries reduced by 30 percent, and Executive Vice President and General Counsel Thomas Gottschalk will take a 10 percent cut. And there will be no annual or long-term cash bonuses paid to GM’s global executives for 2005 performance.

The board also reduced its own compensation by 50 percent to $100,000 a year, the company said. Non-employee directors will forgo cash compensation but will keep some of the stock portion of their annual retainer.

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